Enix was founded on September 22, 1975, as Eidansha Boshu Service Center by Japanese architect-turned-entrepreneur Yasuhiro Fukushima. Enix focused on publishing games, often by companies who exclusively partnered with the company, and is perhaps most famous for publishing the Dragon Quest series of console games developed by Chunsoft. Key members of the developer's staff consisted of director Koichi Nakamura, writer Yuuji Horii, artist Akira Toriyama, and composer Koichi Sugiyama, among others. The first game in the Famicom-based RPG series was released in 1986, and would eventually sell 1.5 million copies in Japan, establishing Dragon Quest as the company's most profitable franchise. Despite the announcement that Enix's long-time competitor Square would develop exclusively for Sony PlayStation, Enix announced in January 1997 that it would release games for both Nintendo and Sony consoles. This caused a significant rise in stock for both Enix and Sony. By November 1999, Enix was listed in the Tokyo Stock Exchange's 1st section, indicating it as a "large company".
Square was started in October 1983 by Masafumi Miyamoto as a computer game software division of Den-Yu-Sha, a power line construction company owned by his father. While at the time game development was usually conducted by only one programmer, Miyamoto believed that it would be more efficient to have graphic designers, programmers and professional story writers working together on common projects.
In September 1986, the division was spun off into an independent company led by Miyamoto officially named Square Co., Ltd. After releasing several unsuccessful games for the Famicom, Square relocated to Ueno, Tokyo in 1987 and developed a role-playing video game titled Final Fantasy, which was inspired by Enix's success in the genre with the 1986 Dragon Quest. Final Fantasy was a success with over 400,000 copies sold, and it became Square's main franchise, spawning dozens of games in a series that continues to the present.
Buoyed by the success of their Final Fantasy franchise, Square developed many other widely known games such as Chrono Trigger, Chrono Cross, Secret of Mana, Legend of Mana, Xenogears, Brave Fencer Musashi, Parasite Eve, Saga Frontier, Romancing Saga, Vagrant Story, Kingdom Hearts (done in collaboration with Disney Interactive), and Super Mario RPG (done under the guidance of Shigeru Miyamoto). By late 1994 they had developed a reputation as a producer of high quality role-playing video games. Square was one of the many companies that had planned to develop and publish their games for the Nintendo 64, but with the cheaper costs associated with developing games on CD-based consoles such as the Sega Saturn and the Sony PlayStation, Square decided to develop titles for the latter system. Final Fantasy VII was one of these games, and it sold 9.8 million copies, making it the second-best-selling game for the PlayStation.
A merger between Square and Enix was in consideration since at least 2000; the financial failure in 2001 of Square's first movie, Final Fantasy: The Spirits Within, made Enix reluctant to proceed while Square was losing money. With the company facing its second year of financial losses, Square approached Sony for a capital injection and on October 8, 2001, Sony Corp purchased 18.6% stake in Square. Following the success of both Final Fantasy X and Kingdom Hearts, the company's finances stabilized, and it recorded the highest operating margin in its history in fiscal year 2002. It was announced on November 25, 2002, that Square and Enix's previous plans to merge were to officially proceed, with the goal to mutually decrease development costs and to compete with foreign developers. As described by Yoichi Wada, Square's president and CEO: "Square has also fully recovered, meaning this merger is occurring at a time when both companies are at their height."
Some shareholders expressed concerns about the merger, notably Square's original founder and largest shareholder Miyamoto, who would find himself holding a significantly smaller percentage of the combined companies. Other criticism came from Takashi Oya of Deutsche Securities who expressed doubts about the benefits of such a merger: "Enix outsources game development and has few in-house creators, while Square does everything by itself. The combination of the two provides no negative factors but would bring little in the way of operational synergies." Miyamoto's concerns were eventually resolved by altering the exchange ratio of the merger so that each Square share would be exchanged for 0.85 Enix shares rather than 0.81 shares, and the merger was greenlit. The merger was set for April 1, 2003, on which date the newly merged entity Square Enix came into being. At the time of the merger, 80% of Square Enix staff were made up of former Square employees. As part of the merger, former Square president Yoichi Wada was appointed president of the new corporation, while former Enix president Keiji Honda became its vice president. The founder of Enix and the largest shareholder of the newly combined corporation, Yasuhiro Fukushima, was made its honorary chairman.
As a result of the merger, Enix was the surviving company and Square Co., Ltd. was dissolved. In July of that year, the Square Enix headquarters were moved to Yoyogi, Shibuya, Tokyo, as part of the process of combining the two companies.
Acquisitions and subsidiaries
Since the merger in 2003, Square Enix has acquired a number of companies, as well as creating several subsidiary companies. To strengthen its wireless market, Square Enix acquired mobile application developer UIEvolution in March 2004, though it was sold in December 2007, and the company instead founded its own Square Enix MobileStudio in January 2008 to focus on mobile products. In January 2005 Square Enix founded Square Enix China, expanding their interests in the People's Republic of China.
In September of that year Square Enix bought the gaming developer and publisher Taito, renowned for their arcade hits such as Space Invaders and the Bubble Bobble series; Taito's home and portable console games divisions were merged into Square Enix itself by March 2010. In August 2008, Square Enix made plans for a similar expansion by way of a friendly takeover of video game developer Tecmo by purchasing shares at a 30 percent premium, but Tecmo rejected the proposed takeover.
Instead, in February 2009, Square Enix announced a takeover deal for Eidos plc, the holding company for Eidos Interactive, the UK-based publisher of the Tomb Raider, Hitman, Deus Ex, Thief and Legacy of Kain franchises, along with its multiple subsidiary development studios that developed the games The acquisition of Eidos was completed in April 2009, and in November the publisher was merged with Square Enix's European publishing organization to form Square Enix Europe.
In March 2011 Square Enix founded another mobile development studio, Hippos Lab, followed by another in 2012, Square Enix Montréal. A third mobile studio was founded in Indonesia in June 2013, Smileworks, but was closed in January 2015. The latest subsidiary company to be created was Shinra Technologies, a cloud gaming company, but it was only in existence from September 2014 to January 2016. In 2015, Square created a new studio known as Tokyo RPG Factory to develop what was then dubbed Project Setsuna. On February 21, 2017, the formation of new studio Studio Istolia was announced. The studio, headed by Hideo Baba, would be working on the new RPG Project Prelude Rune. Baba departed the studio in early 2019, and shortly after this Studio Istolia was closed and Project Prelude Rune cancelled following an assessment of the project, with its staff being reassigned to different projects within the company.